With-profit Annuity Guide

| RETIREMENT FUND MEMBERSHIP MANUAL

COMMISSION FREE PENSION QUOTATIONS It is very important for you to first read the guide titled “OPTIONS AVAILABLE TO YOU WHEN YOU RETIRE”. From that guide you will note that, when you reach retirement, you will face a difficult decision as to what pension to purchase with your retirement savings in the Cape Peninsula University of Technology Retirement Fund (CPUTRF). There are many different types of pensions available and this can be a daunting experience for some members and very often members are unable to access good advice.

The CPUTRF has therefore negotiated special arrangements with two registered Insurance Companies. These arrangements may allow you to access pensions at a better rate than you would be able to secure if you approached these Insurance Companies in your personal capacity.

To assist you in making your decision, the CPUTRF will, if you would like them to, arrange for two commission-free quotations to be provided to you. From these you will be able to see the amount of pension your retirement savings could purchase.

The information in this document can also be used to assist you in assessing the relative value of any other pension quotations that you may obtain.

These pensions have the following features: • They are with profit pensions payable for the rest of your life and the life of your wife/husband if she/he outlives you.

• A lump sum is paid to your heirs if you (and your wife/husband if you are married) die within 5 years after retirement.

You can however choose a longer period than 5years.

• Your monthly pension will never decrease (as may be the case for a living annuity).

• Your pension will continue at the full monthly amount for the rest of your life even if you live longer than the average person (which may not be the case for a living annuity).

• A nnual pension increases should help offset the effects of inflation although the level of these pension increases is not guaranteed.

• T he amount of your monthly pension is determined on retirement and increases with pension increases each year - you do not have to make difficult decisions each year as to how much pension to draw and where to invest your retirement capital (as is the case with a living annuity).

• T he pensions are commission free resulting in more of your money going toward your pension which will increase your monthly pension amount.

THE TRUSTEES RECOMMEND THAT YOU ASK FOR THESE QUOTES TO BETTER UNDERSTAND YOUR OPTIONS. THERE IS NO OBLIGATION TO ACCEPT THE QUOTES.

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COMMISSION FREE WITH-PROFIT PENSION QUOTATIONS DETAILS OF THE COMMISSION FREE WITH-PROFIT PENSION ARRANGEMENTS The Trustees have negotiated with Momentum Employee Benefits (a division of MMI Holdings Limited) and Old Mutual Corporate (a division of the Old Mutual Life Assurance Company (SA) Limited) to offer you preferential rates on their Golden Income With-Profit Annuity (underwritten by Momentum) and Platinum Pension 2003 (underwritten by Old Mutual Life Assurance Company (SA) Limited) pension products respectively.

Old Mutual and Momentum have agreed to provide quotations based on your personal information. It is important to ensure that you have an understanding of these companies before making any decision to trust them with your retirement savings.

Further information on the two Insurance Companies can be found on their respective websites:

Further information

MOMENTUM

OLD MUTUAL

www.momentum.co.za or www.mmiholdings.co.za

www.oldmutual.co.za

How a With-Profit annuity works was discussed in the guide titled “OPTIONS AVAILABLE WHEN YOU RETIRE”. If you choose this option, it is important to note that this pension will not be paid by the CPUT Retirement Fund. It will be paid by the Insurer that you ultimately choose. As this is an arrangement between the CPUT Retirement Fund and Momentum/Old Mutual, the costs will be lower as no broker commission will be payable.

The pension quotations from both Momentum and Old Mutual are based on the standard characteristics set out in section 1.1. below plus they have additional parameters that members may choose from set out in 2.2.

1.1 Standard pension quotations Type of pension

With-profit life pension payable until your death (or the later date of death of your husband/wife if a spouse’s pension is included in the pension purchase amount)

Second life pension

Spouse’s pension of 75% of your monthly pension commencing at the later of the date of your death and the expiry of the guarantee period (only applicable to members married at retirement).

However, these parameters differ between the two insurance company and are detailed in the table below.

Guarantee period

If you (and your husband/wife if you are married) die within 5 years of retirement) the pension payments for the balance of the 5 year period will be paid as a lump sum to your estate. However, there are additional parameters that you can choose from. See table below.

C O M M I S S I O N F R E E W I T H - P R O F I T P E N S I O N Q U O TAT I O N S | 78

| RETIREMENT FUND MEMBERSHIP MANUAL Pricing basis and pension increases

3.0% per annum net interest rate. Annual pension increases are declared by the Insurance Company to help counter the effects of inflation (the level of increases are not guaranteed). Old Mutual has a different pricing basis to Momentum. See table below.

Pension increase date and first pension increase

Increases are effective on 1 April each year. The first increase after retirement is proportionate to the number of months your retirement date is before 1 April

Pension payments

The pension is paid monthly on the 25th day of the month

Payments in the month of death

A full pension payment is payable in the month of your death and in the month of death of your husband/wife if you are married

Commutation on retirement

The amount of cash you are permitted to take is detailed in the Retirement Options guide. It is important to note that the less you take in cash at retirement, the higher will be the pension that you can buy on retirement.

1.2 Parameters applicable to the Old Mutual and Momentum quotations.

PARAMETER

OLD MUTUAL

MOMENTUM

Annuity type

With-profit life annuity

With-profit life annuity

Pricing basis

2.5%; 3%; 3.5% or 4% net interest rate

3.0% net interest rate

Commutation permitted

Not applicable

Not applicable

Spouse’s contingent pension

Single or joint life

Single or joint life – Joint life if married

Spouse’s percentage

Percentage of pensioner’s pension at the date of death 1%-100%

Guarantee period

75% Guarantee period in years

5,10 or 15 years

5, 10 or 15 years

Other contingent pensions

No

No

First pension increase

Proportionate on 1 April following retirement

Proportionate on 1 April following retirement

Commissions

0%

0%

2. PENSION INCREASE METHODOLOGY As a pensioner, one of your main concerns is how much your pension will increase each year. Ideally, you would like your pension to keep pace with inflation to ensure that you can maintain your standard of living in retirement.

The philosophy used by both Momentum and Old Mutual in declaring pension increases is to ensure stable increases over time, so that market volatility is absorbed as far as possible and not passed on to you as the policyholder.

Users should be aware that short-term performance can be volatile and that past performance is not necessarily indicative of future performance. Every effort has been made to ensure that the information contained in this document is accurate.

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